Views on RBI Policy Rate Cut Impact on Bonds & Investments by Chanchal Agarwal CIO Equirus Credence Family Office
Below the Views on RBI Policy Rate Cut Impact on Bonds & Investments by Chanchal Agarwal CIO Equirus Credence Family Office
RBI Delivers a Policy ‘Tehelka’; Frontloads Easing, Shifts Stance
In a bold policy shift, the RBI delivered a surprise 50 bps repo rate cut and announced a 100 bps CRR cut in four tranches, injecting ~Rs.2.5 lakh crore liquidity into the system. This marks a cumulative 100 bps easing in CY2025, following earlier 25 bps cuts each in February and April. Coupled with a record Rs.2.69 lakh crore dividend and Rs.9.5 lakh crore in durable liquidity injections since January, the RBI is aggressively stimulating growth via both monetary and fiscal levers.
Notably, the MPC shifted its stance from “Accommodative” to “Neutral,” signalling that the front-loaded easing cycle may have peaked. The move aims to support growth amid declining inflation projections and weak private capex, but it also underscores constrained room for further cuts in the near term. While positive for credit growth and capex revival, the move could compress banking NIMs near-term. On yields, the front-end may ease further, steepening the curve as excess liquidity compresses short-term rates. We see merit in extending duration to 4–5 years, up from 2–3 years earlier, as ‘risk premium’ pricing re-emerges in the bond market.
Above views are of the author and not of the website kindly read disclaimer
